Canada’s TSX 60 index broke medium-term support — at 680 on the weekly chart below. Respect of the descending trendline suggests another decline. Failure of primary support at 650 would confirm. 63-Day Twiggs Momentum deep below zero also indicates a strong primary down-trend. A conservative target for the decline would be 580*.
* Target calculation: 650 − ( 720 − 650 ) = 580
The Brazilian Real has fallen sharply against the greenback since the government took measures to stem the inflow of funds on capital account. Breach of medium-term support at $0.56 would indicate respect of the descending trendline and another test of primary support at $0.52. In the long-term, failure of primary support would warn of a fall to $0.40.
* Target calculation: 0.52 – ( 0.64 – 0.52 ) = 0.40
The South African Rand is weakening against both the US and Aussie dollar. The Aussie (another resources currency) shows an accelerating up-trend against the Rand. Breakout above R8.30 would signal an advance to R9.00*. Accelerating up-trends, however, inevitably lead to blow-offs — as in 2008.
* Target calculation: 7.50 + ( 7.50 – 6.00 ) = 9.00
The CRB Commodities Index remains in a primary down-trend. Respect of the descending trendline, with reversal below 315, would warn of another decline. Breakout above the descending trendline is less likely, but would indicate that the down-trend is weakening. 63-Day Twiggs Momentum penetrated its descending trendline but remains below zero, suggesting that the down-trend has slowed but not reversed.
* Target calculation: 295 – ( 325 – 295 ) = 265
Copper rallied to test its descending trendline at $8000/tonne. 63-Day Twiggs Momentum deep below zero indicates a strong primary down-trend. Breakout above $8000 would indicate that the down-trend is weakening, while respect of the descending trendline would warn of a decline to 6000*.
* Target calculation: 7000 – ( 8000 – 7000 ) = 6000
Brent Crude broke out above its trend channel, indicating that it is forming a base above $100/barrel. 63-Day Twiggs Momentum recovered above zero to confirm the breakout. Expect retracement to test primary support at $100, but respect is now likely and would suggest a primary up-trend.
* Target calculation: 5600 – ( 6600 – 5600 ) = 5100
Nymex WTI crude is rising sharply, closing the divergence from Brent crude. News of the Seaway pipeline reversal that will relieve congestion at the Cushing, Oklahoma hub sent crude futures soaring. Expect a short retracement followed by an advance to $115.
Conclusion: Commodities remain in a primary down-trend caused by the strengthening dollar. Brent crude is forming a bottom, but rising crude prices are likely to dash hopes of an early economic recovery. Falling commodity prices should cause sympathetic weakening of the Australian Dollar and Canadian Loonie.
